Rate Cuts Trigger Inflation — Stocks, Gold, and Crypto Melt-Up

In today's video, I want to tell you about the consequences of the Federal Reserve cutting interest rates. So we're going to cover the impact on, but not limited to, the stock markets, gold, silver, bitcoin, the bond markets, consumer interest rates, and inflation. So the next Federal Reserve meeting takes place on September 17th. And right now, according to the CME FedWatch tool, there's an 89.3% chance that the Federal There's a 10.7% chance that they're not going to cut rates. Okay, so these odds have been fluctuating over the past month from 59% to 100%. Now listen, if they don't cut interest rates in September, then I want you to know that the next meeting is going to be in October. So regardless, this information is going to be important to know regardless of what happens in September, because they're going to cut interest rates sooner or Now take a look at this. When the Federal Reserve cuts interest rates, when the stock market is within 2% of their all-time highs, which it is right now, here's what history shows. On average, one month after the interest rate cuts, the stock market doesn't do much. So on average, it actually goes down by 0.2%, so it's pretty flat. Over the next three months, on average, the stock market goes up by 2.1%. Over the next six months, on average, the stock market goes up by 3.8%. Okay, over the next 12 months, on average, the stock market goes up by 13.9%. But I just want to point this out to you. Look at what happens every single time 12 months out. The market has always gone up. So the reason I'm saying this is that if you're on the sidelines hoping for a stock market crash to get in at a better price, the longer you wait, the more the odds are stacked against you. Time would be against you. So if you want to take the risk of waiting for the stock market to go down to buy the dip, then your best odds of it playing out like that would be shortly after the rate cuts. Because if you compare one month after the rate cuts, the stock market goes higher 45% of the time. But after three months, the stock market goes higher 75% of the time. And again, after one year, the stock market has gone higher 100% of the time. Okay, but you know what? Maybe it'll be different this time. Maybe the stock market will go down 12 months after the interest rate cuts. But my opinion is that I highly doubt that it's going to be different this time because we are printing money like crazy. Like I'm telling you, like never before, we are in the great melt-up. Now let me tell you this. Even at the hint of an interest rate cut at Jackson Hole, why did the price of gold surge? Why did the price of silver shoot up to near recent highs above $39 a troy ounce? Now why did Bitcoin and altcoins rally with an increased expectation of the Federal Reserve cutting interest rates? It's because, as I explained five months ago, cutting interest rates is inflationary. Prices inflate and that includes financial assets, gold, silver, Bitcoin, etc. So if you don't believe it, you should watch that video. I break it down so easily that everybody can understand. And if you're a skeptic and you want to make the money supply argument, then please watch that video. And by the way, the money supply has been expanding as well anyways, so there's no surprise there. But listen, here's another thing that I want to point out to you. That cutting interest rates also weakens a country's currency. And when the odds of an interest rate cut increased on Friday, the dollar reacted by falling lower. And that's another thing. When the dollar weakens, it causes commodity prices to go up. And of course gold is an example. But listen, here's another way that you can think about it. So here's the price of gold over the past 30 years. And it's not really the value of gold that's going up. It's a dollar that's being devalued. And as we enter a period, you know, another period of easy monetary policy, the dollar is going to lose more purchasing power and the price of financial assets is going to go up higher and higher. I mean, just look at the chart for crying out loud. Look at the stock market, the S&P 500 over the past 30 years. Easy money and inflation are fueling ever rising prices. And that includes, of course, financial assets. So listen, as I said before, interest rate cuts come first, and then it's going to come the quantitative easing. So this is all going to contribute to an easier monetary policy. It devalues the dollar and prices inflate. So it's just that simple. And Jackson Hole, which I covered in my previous video, shows that the Federal Reserve is warming up to cutting rates, which you can see in their official policy statements, and then firing up the money printers shortly after. So I'm guessing 2026, which is actually what I predicted in 2024. Now, regarding the bond markets, in anticipation of the Fed rate cuts, interest rates on bonds started to fall. And this means that borrowing costs will begin to decline. So not rapidly. It's all going to depend on how quickly they cut rates for the rest of this year and also 2026. So the yield on the three month bill went lower after Jackson Hole. And again, this was due to anticipation of the rate cuts. So this is good for the government because they rely heavily on short term borrowings. So you know how President Trump has been hounding the Federal Reserve to cut interest rates so that the government would have to spend less on interest expense on all their borrowings? Well, these rate cuts are going to make President Trump a little bit happier about that situation. And the interest rate on the 10 year Treasury continues to go down. So this 10 year is very important because mortgage interest rates are correlated to this one. So this chart shows you the average interest rate on a 30 year mortgage and also shows you the Fed funds interest rate. And again, it's very correlated to the 10 year Treasury yield. And just so you know, mortgage interest rates have fallen to a low this year as interest rates on the 10 year yield have been falling. But as mortgage interest rates fall, it's going to be a tailwind for home prices. And I do want to point this out. So the yield on the 30 year bonds did go down after Jackson Hole. However, they're less affected by the rate cuts because the Federal Reserve has more control over shorter duration Treasuries. But when the Federal Reserve expands their balance sheets, which comes after the rate cuts, they can certainly bring this down if they wanted to. I'm not saying that they're going to choose to do so, but they can in a more extreme situation. And these days, honestly, like nothing surprises me. Anyways, I showed you the correlation of the Fed funds interest rates and mortgage interest rates. Now, here's the correlation between auto loans in darker blue and the Fed funds rates in lighter blue. So if the Fed cuts rates, then interest rates on auto loans follow. Now, here's the interest rates on credit cards in blue and the Fed funds interest rate in lighter blue. Of course, I mean, interest rates on credit cards are still going to be high, but it should drift down lower as the Fed cuts rates. And as Federal Reserve lowers rates, this means that interest rates on savings accounts and CEDs are going to fall as well. So the more that they cut, the lower the interest rates will go down on these savings instruments. So about three months ago, I made a video on how you can earn interest in your brokerage account. So the example I gave in my video is S-Gov, and it's going to be the same thing here. As the Federal Reserve cuts interest rates, the interest that S-Gov or similar instruments pay you is going to decrease again by how much depends on how much the Federal Reserve cuts rates. Anyways, those are the consequences of the Fed rate cuts. And of course, that's not all-encompassing, but that covers the main points. So please subscribe. I'll keep you updated on the whole situation. Thank you for the support, and I wish you a very nice day. Take care.